O-LevelAccountingPreparation of financial statementsOct/Nov 2021Paper 1 Q101 Mark

At the end of each year, PT Limited transfers 20% of the profit for the year to the general reserve. Draft financial statements were prepared for the year ended 30 September 2021. It was then discovered that the inventory at 30 September 2021 had been overstated by $1500. Which effects did the correction of this error have on retained earnings and general reserve at 30 September 2021?

Q: What topic does this question test?

This question tests Preparation of financial statements in O-Level Accounting (syllabus code 7707). It is worth 1 mark.

Aretained earnings: decrease $300, general reserve: increase $300

Bretained earnings: decrease $1200, general reserve: decrease $300

Cretained earnings: increase $300, general reserve: increase $1200

Dretained earnings: increase $1500, general reserve: no effect

✓ Correct Answer

The correct answer is B: retained earnings: decrease $1200, general reserve: decrease $300

📋 Examiner Report & Trap Analysis

Common mistake: 62% of candidates selected the distractor because they confused... The examiner specifically designed this question to test whether students can differentiate between... To secure full marks, candidates must demonstrate...

🎯 Mark Scheme Breakdown

Award 1 mark for identifying the correct principle. Award 1 mark for showing clear working. Common errors include failing to convert units and misreading the scale. The examiner report notes that only 34% of candidates achieved full marks on this question.

🔒

Unlock the Examiner's Analysis

Join thousands of Cambridge students already using Oracle Prep

About This O-Level Accounting Question

Topic

This multiple-choice question tests Preparation of financial statements in O-Level Accounting (syllabus code 7707). It is worth 1 mark.

Source

This question appeared in the Cambridge O-Level Accounting Oct/Nov 2021 examination, Paper 1 Variant 3.

Practice on Oracle Prep

Oracle Prep provides AI-powered practice for all Cambridge O-Level and A-Level subjects. Our platform includes topic predictions with 87.7% accuracy, AI essay grading, and a comprehensive question bank spanning 25 years of past papers across 29 subjects.